This invention relates generally to computerized insurance methods and systems, and, more particularly, to a computer system and computerized method for implementing and administering a program to provide a person with guaranteed lifetime income based on at least an initial contribution of assets, such as from a rollover individual retirement account ("IRA") or qualified or non qualified retirement plan, while providing the person with a measure of liquidity in the assets invested in the program.
An annuity is a well-known financial vehicle used to pay a person a certain sum of money in a series of distributions made at regular intervals, such as monthly or annually, based on a given amount of principal consisting of an initial contribution of assets and any subsequent contributions. Annuities are available in many forms. The distributions may be made for a predetermined definite period, as in an annuity certain, or for as long as the person lives, as in a life annuity. Payments under a life annuity may terminate on the annuitant's death, as in a straight life annuity, or may continue to a beneficiary for a specified period after the annuitant's death, as in a life annuity with period certain. Alternatively, a life annuity may be based on two lives jointly, as in a joint and last-survivor annuity in which payments continue to be made to the survivor for the remainder of his or her life, or may provide a beneficiary a lump sum payment upon the death of the annuitant. The payments under an annuity may be set to begin one payment interval after purchase of the annuity, as in an immediate annuity, or after a specified amount of time, as in a deferred annuity.
Retirement assets, such as IRAs and tax-deferred retirement plans, are widely used as tax deferred investments to provide retirees with income after their retirement. Upon retirement, a retiree may have access to one or more such tax deferred assets as well as other liquid assets which have accumulated over time. Because these assets may be an important source of income for the remainder of his or her life, it is extremely important for the retiree to make optimal use of them. Clearly, it is undesirable for the retiree to consume the assets too quickly and not retain sufficient funds to live on thereafter. Conversely, many retirees also find it undesirable to consume assets too slowly, thus making sacrifices in their standards of living, and then die owning substantial assets which often pass to their children who may not need them.
In addition, retirees often consider it highly important to keep their retirement assets substantially liquid, i.e., to be able to withdraw as cash or to convert to cash all or a large portion of the assets on relatively short notice, such as in the event of a medical emergency or family celebration. Therefore, it is important that the assets not be locked up in a financial vehicle which makes them inaccessible or illiquid.
No program exists, to the knowledge of the inventor, which can provide both continuous guaranteed lifetime income and partial liquidity, i.e., the ability to make a partial withdrawal and retain an adjusted continuous guaranteed lifetime income. While life annuities may be used to provide lifetime income to the retiree, they do not satisfy the liquidity needs of retirees, and life annuities starting at a relatively early retirement age. On the other hand, other financial vehicles (e.g. bond funds) which may provide a retiree with income and liquidity do not provide the retiree with the necessary guaranteed lifetime income. Furthermore, in the case of other financial vehicles, most do not make optimal use of retirement assets, as described above.
Therefore, there is a need for a program which makes optimal use of retirement and other types of assets to provide a retiree or other person with continuous guaranteed lifetime income over potentially long periods while still providing the person with a substantial amount of liquidity in the assets. The computerized method and system of the present invention fill this need.